CENTER FOR UNIVERSAL EDucaTION WORkING PAPER 6 | AUGUST 2012 Center for Universal Education at BROOKINGS FINANCING FOR A FAIRER, MORE PROSPEROUS KENYA A REVIEW OF THE PUBLIC SPENDING CHALLENGES AND OPTIONS FOR SELECTED ARID AND SEMI-ARID COUNTIES Kevin Watkins Woubedle Alemayehu Center for Universal Education at BROOKINGS Kevin Watkins is a non-resident senior fellow at the Brookings’ Center for Universal Education. Woubedle Alemayehu is a research project manager for Georgetown University. Acknowledgements We would like to thank the many people who helped to shape this report. Special mention must be made of Hon. Mohamed Elmi, the minister of state for Development of Northern Kenya and Other Arid Lands (MDNKOAL), who read and commented on an early draft. Other staff in the ministry also helped to guide our work. Izzy Birch, technical advisor to the minister, provided a mixture of patient guidance, support and encouragement. While we spare Izzy any responsibility for the final content of the report, her insights have been invaluable—and we owe her a special debt of gratitude. We also thank David Siele, director of Human Capital for MDNKOAL, for detailed comments on the sections of the report dealing with education. Several staff members at the World Bank office in Nairobi were extremely generous in providing time and tech- nical advice on data analysis. They include Fred Owegi, Frederick Masinde Wamalwa and Catherine Ngumbau. John Mugo, the coordinator of Uwezo Kenya, helped to guide us through the data on learning achievement, and Ibrahim Hussein, the chairman of the Teachers Service Commission at the time of our research, made available technical staff to support our work. We were extremely fortunate in having the opportunity to present the report to a two-day retreat of policymak- ers, researchers and civil society representatives held in Naivasha, Kenya. Convened jointly by the Office of the Prime Minister, MDNKOAL, and the Commission on Revenue Allocation (CRA), and facilitated by the United Nations Millennium Campaign, the event produced detailed and constructively critical comments, as well as a lively debate. For feedback and discussion during and after the retreat from the CRA, we thank Micah Cheserem (chair), Fatuma Abdikadir (vice-chair), and Amina Ahmed. We have benefited also from advice on international experience in revenue-sharing from Pinaki Chakraborty of the National Institute of Public Finance and Policy in New Delhi, India, and from Dr. Meheret Ayenew of the Forum for Social Studies, Ethiopia. Charles Abugre from the United Nations Millennium Campaign also provided insightful comments. Research for the report was conducted under the auspices of the Center for Universal Education (CUE) at the Brookings Institution. We were very fortunate to get detailed comments from several colleagues, including CUE Director Rebecca Winthrop. Other CUE staff provided helpful editorial advice, including Anda Adams, Lauren Greubel and Katie Smith. Finally, we thank the William and Flora Hewlett Foundation for supporting the research.* * The Brookings Institution is a private non-profit organization. Its mission is to conduct high-quality, independent research and, based on that research, to provide innovative, practical recommendations for policymakers and the public. The conclusions and recommendations of any Brookings publication are solely those of its author(s), and do not reflect the views of the Institution, its management, or its other scholars. Brookings recognizes that the value it provides is in its absolute commitment to quality, independence and im- pact. Activities supported by its donors reflect this commitment and the analysis and recommendations are not determined or influenced by any donation. Contents Executive Summary . 1 Introduction . 5 The 2010 Constitution: Putting Equity on the Agenda . 8 Poverty and Health in the 12 Counties . 15 The 12 Arid and Semi-Arid Land Counties . 15 Income Poverty and Inequality . 18 Health and Nutrition . 21 Education: Access and Learning . 27 The National Picture: School Participation and the Quality of Education . 27 The National Learning Achievement Deficit . 33 Education Disadvantage in the 12 ASAL Focus Counties . 39 Some Lessons from International Experience . 53 Intergovernmental Transfers . 53 International Experience . 54 Social Protection and Safety Nets . 61 Equitable Sharing for Kenya: The Education Sector and Beyond . 64 An Initial Framework: The Commission on Revenue Allocation . 64 Currently Devolved Funds . 66 Towards Equitable Financing in Education . 68 The 12 ASAL Counties . 70 Equitable Financing is Not a Subsitute for Effective and Equitable Policies . 75 Conclusion . 77 References . 80 LIST oF FIgures Figure 1: Poverty Incidence and Poverty Gap Ranking: 12 ASAL Counties . 20 Figure 2: Poverty and Population: County Shares of National Poverty Gap and Population . 21 Figure 3: For Richer, for Poorer: Share of Population in Top and Bottom Quintile of the Wealth Distribution . 22 Figure 4: The Nutritional Status of Kenya’s Children: Extreme Stunting and Underweight-for-Age . 24 Figure 5: Progress in Education: Male and Female Enrollment Rate (2000-2009) . 28 Figure 6: The Age Profile in Kenya’s Classrooms: Age-by-Grade Enrollment (2010) . 29 Figure 7: Kenya’s Wealth Gaps in School Attendance (2008) . 30 Figure 8: Charting Grade Progression: Reported Enrollment for Standard 1 Through the KSCE (2003) . 31 Figure 9: Kenya’s Primary School Learning Outcome Results: National Frequency Distribution for Test Scores (2010) . 34 Figure 10: Female Literacy and Gender Disparity . 39 Figure 11: Primary School Ranking: Primary School Net Enrollment Rates and Gender Parity Ratios . 41 Figure 12: Secondary School Ranking: Secondary School Gross Enrollment and Gender Parity . 42 Figure 13: Kenya’s Unequal Distribution of Out-of-School Children . 43 Figure 14: School Progression Profiles: Enrollment Levels by Grade for Wajir, Turkana, West Pokot and Garissa (2009) . 44 Figure 15: Unequal Opportunity: Share of County Secondary School-Age Population Sitting Kenya Certificate Secondary Examination (KCSE) (2010) . .46 Figure 16: Distribution of Kenya Certificate Primary Examination (KCPE) Test Scores: Turkana, West Pokot, Tana River and Mandera (2010) . 48 Figure 17: Unequal Achievement: Learning Levels for Arid Districts and Average for All Districts (2011) . 50 Figure 18: Actual Constituency Development Fund (CDF) Allocations (2009-2010) vs . Inversion of the Current Formula . 66 Figure 19: CDF Budget Allocation Including Weighting for Population Density . 67 Figure 20: Derived County-Level Share of Primary Education spending as a Proportion of School-Age Population . 70 Figure 21: Derived Share of FSE Spending as a Proportion of School-Age Population . 71 Figure 22: Estimated Primary Education Budget Allocations by County: Equal Weighting Attached to School-Age Population and Children in School . 72 Figure 23: Estimated County-Level Budget Allocations: Current Position vs . A Reinforced Equity Scenario . 73 Figure 24: Secondary Education Allocations Under an Equity-Based Financing Formula: Comparison with Current Allocations . 74 LIst oF tabLes Table 1: Population Size and Share: 12 ASAL Counties . 17 Table 2: Immunization and Qualified Medical Assistance at Birth: Ranking of 12 Counties and National Average . 25 Table 3: Maternal Education and Wider Development Indicators . 27 Table 4: Reported School Attendance and Enrollment . 30 Table 5: Kenya Certificate Primary Examination Average Scores: 12 ASAL Counties and National Average (2010) . 47 Table 6: KCSE Results: Selected ASAL Counties and National Average (2010) . 49 FINANCING FOR a FaIRER, MORE PROSPEROUS KENYA A REVIEW OF THE PUBLIC SPENDING CHALLENGES AND OPTIONS FOR SELECTED ARID AND SEMI-ARID COUNTIES Kevin Watkins Woubedle Alemayehu exeCutIve summary ‘equitable sharing’ rules governing public spending will provide a litmus test of whether the principles of he constitution adopted by Kenya in 2010 is a re- the new constitution are being translated into public tmarkable document. It shifts the locus of political policy. authority towards devolved governments, establishes a range of social and economic rights and includes a This paper looks at the implications of the constitu- bill of rights. The constitution also sets out some prin- tion’s public spending provisions for 12 Arid and Semi- ciples on public spending. Future governments will be Arid Land (ASAL) counties.1 Identified by the Ministry required to ensure that revenue and budget alloca- of State for Development of Northern Kenya and Other tions meet constitutional requirements for ‘equitable Arid Lands as areas of specific concern on the basis sharing’. These requirements include affirmative ac- of their deeply entrenched patterns of disadvantage, tion aimed at reducing disparities between regions, these counties have some of the worst social indica- combating marginalization, and raising the quality tors in Kenya. Poverty incidence in several counties and coverage of basic service provision in areas that reaches levels in excess of 80 percent. Poverty in the are lagging behind. ASAL counties is also more intense. While the national poverty gap for Kenya is 16 percent, there are seven These are bold aims. Kenyan society is fractured by ASAL counties in which it is over 30 percent. Food se- deeply entrenched vertical and horizontal inequali- curity problems are endemic. Access to basic services ties, which have been perpetuated and reinforced is limited,